Yesterday, the NFL released the results of its independent investigation of the New England Patriots’ practices around football inflation.  In short, the Patriots cheated.  Most followers of football already knew this, but now it’s confirmed.  People within the organization, perhaps including quarterback Tom Brady, conspired to remove air from their footballs making them easier to throw and catch.

If the Patriots season had ended before the playoffs started, this likely wouldn’t be seen as a big deal.  The punishment might be a slap on the wrist, a couple of fines, and a lost draft pick.  But the Patriots won the Super Bowl, and the deflated balls weren’t discovered until the game before it, the AFC Championship Game.  While this level of cheating may not be enough to sway the outcome of a game, rules were knowingly broken.  So do you take away their Super Bowl trophy?  No one seems to be thinking that.  Tom Brady could get suspended a couple of games, fines will certainly be paid, and perhaps that lost draft pick still.  In other words, this is just the cost of doing business.

Think of it this way, the Patriots are the most successful NFL team of this generation.  They’re contenders every year, and have a handful of Super Bowl rings.  And if cheating doesn’t really stop them from winning championships, they have an incentive to consider doing it again.  Keep in mind, this may not be the first time either.

The people that run billion dollar organizations aren’t as dumb as we might think.  They understand the risks they’re taking and the possibility of being caught.  But if caught they still come out ahead of where they were, it’s just an expense on the way to profits, like the cost of employees.  We’ve seen this most recently with major financial institutions after the recession.  Everyone is paying fines left and right.  The fines are sometimes token amounts.  If I make $1 billion, and you charge me a $250 million fine three years later, I think I’m going to be just fine.  Especially if I budgeted for possible fines, and many institutions do keep reserves for such things.  Some of the fines and settlements are so large that perhaps some organizations will learn their lesson.  Perhaps not.  Time will tell.

The key is to make the punishment fit the crime.  If the punishment is fines, they should be severe enough that the organization will learn it’s cheaper to prevent cheating than it is to allow it and deal with repercussions later.  Will the Patriots suffer such a strong blow that this deters future behavior?  Not likely.  The NFL just doesn’t have a track record of crippling their own.  And since they regulate themselves, a harsh punishment could make the entire football brand look bad.  For the Patriots, and some companies, “punishment” is just merely a small cost of winning.

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categories: business, economics, sports